Slackers? Definitely false. Lagging waaay behind large businesses when it comes to offering employees a 401(k)? Definitely true, but, well… read on.

No slacking here

Let’s look at small businesses with fewer than 50 employees. These folks have been working like maniacs: In the first 3 quarters of 2014 alone, this group was responsible for 44% of new jobs, according to a report from ADP. That’s not slacking.

No 401(k) love, either

America’s small businesses are struggling with today’s archaically complex 401(k). Only 16% of small businesses offer a 401(k), while 89% of large companies do. As I just noted, small businesses are not slackers, but they don’t have much to work with. Stacey Cowley, in a recent New York Times article, highlights this deficiency: “Fidelity says its 401(k) plans tend to be too costly for companies with less than $10 million in plan assets. At Charles Schwab, the floor starts at $20 million.”

It just ain’t easy to get the big benefits of a 401(k) if your business is small. If you’re a small business owner who actually has a 401(k), or who has done the research prior to attempting one, you know exactly what I’m talking about.

The great 401(k) divide

What we’re really talking about is the mother of all legacy problems: Our bewildering old 401(k) started life as a provision in the Revenue Act of 1978 that later became Internal Revenue Code Sec. 401(k). At that time, the Commodore 64 was high-tech. Decades later, the 401(k) still doesn’t have a real name, and it seems to be running on the same technology as that 8-bit Commodore.

What started out as a provision in the Internal Revenue Code (with all the simplicity and clarity that that suggests) has inevitably become more and more mind-bending for those of us without the benefits of law, finance, and/or economics degrees.

Large businesses have a workaround

Actually, they have a couple. First, they can afford to commit dedicated, professional staff to the care and feeding of these big old 401(k)s. Second, they have size, which means their business is important to a 401(k) provider, which means they often get what they want – frequently at much lower prices than a small business can ever hope to negotiate.

Small businesses get dumped on

OK, maybe that’s a bit strong, but they certainly haven’t been getting any love (in the form of a 401(k) they can actually use and afford). If you sell legacy 401(k)s that require big staff and bigger budgets, then the grass is understandably greener over by the large businesses. And, even though American entrepreneurs are hard at work producing next-gen versions of the 401(k) – specifically for small businesses – not enough small businesses know they exist. And the big old legacy 401(k)s are still very happy to take their money.

Not for long though, because that’s changing. Leaner, meaner, and, uh, modern-er 401(k)s are the next big thing.

Times, they are a-changin’

If you work at, or own a small business, the news is good on the 401(k) front. The first next-gen versions of retirement plans for small business are out of the oven. This movement to provide small businesses with real-live, actually-made-for-them retirement plans is the subject of a recent New York Times article, “Tailoring Retirement Plans to Companies with a Handful of Workers.” ForUsAll is featured in the article – so check it out and then ask us your questions. We’re eager to spread the good news!